The troubles of Moulinex-Brandt

Kitchen sinking

Europe’s third-largest white-goods maker teeters on the edge

AS RECENTLY as early July, managers of Moulinex-Brandt, a French-Italian group that makes electrical and white goods, issued a statement denying that they were preparing to file for bankruptcy protection. In August, the group was tantalisingly close to a rescue deal via a recapitalisation. But on September 7th came a bleak announcement: Moulinex-Brandt had suspended payments to creditors and been placed under six months' court protection while a buyer is sought. Thousands of jobs are at risk.

It is a sorry end for a French icon that dates from 1932 and was a pioneer of labour-saving domestic appliances. But for more than 15 years Moulinex had lurched from misadventure to crisis, under a succession of managers. In a market as fiercely competitive as white goods, this was a sure recipe for trouble. Even a smart move in the early 1990s to buy Krups, a German competitor that owns one of Europe's strongest brands, was undermined by the debt burden taken on to acquire it.

But the Moulinex story is also a cautionary tale about European business, because its fate was ultimately decided by the control structure that resulted from its merger at the end of last year with Brandt, the Italian offshoot of El.Fi, a holding company controlled by the Novicelli family.

These Brescian entrepreneurs first bought a 23% stake in Moulinex in March 2000, and then took control at the end of that year, believing that their Brandt business could carry the indebted and loss-making French group through its troubles. Under the terms of the deal, the Novicellis owned 74% of the merged group's capital.

However, Moulinex-Brandt's debts proved crippling, especially once Brandt's own business slowed. At the last count at the end of April, indebtedness had reached euro820m ($727m), and it is certainly higher today.

Patrick Puy, the group's boss, struggled to put together a rescue plan. He claims that bank financing was available, had El.Fi been prepared to inject its share of the euro230m of new money that would be needed over three years to save the group. But the Italians refused, and objected strongly when it was pointed out that they had extracted euro120m from Brandt shortly before its merger with Moulinex. Profit, they said, from an unrelated sale. To Mr Puy, it looks like cash that could have made the merged entity viable. Instead, Moulinex-Brandt will probably be broken up, and its separate brands either sold to rivals or closed. How sad.